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FB Financial Corporation Reports Second Quarter 2020 Results

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Reported net income of $22.9 million, or diluted EPS of $0.70, reflecting record mortgage contribution

Adjusted PTPP earnings* were $57.8 million for the second quarter, Adjusted EPS* of $0.74

Recorded provisions for credit losses of $25.9 million building ACL to 2.34% of loans HFI

FB Financial Corporation (the "Company") (NYSE: FBK), parent company of FirstBank, reported net income of $22.9 million, or $0.70 per diluted common share, for the second quarter of 2020, compared to net income of $18.7 million, or $0.59 per diluted common share, for the second quarter of 2019. The forecasted impact of the COVID-19 pandemic crisis resulted in provisions for credit losses and unfunded commitments totaling $25.9 million in the second quarter compared to $29.6 million in the first quarter of 2020 and $0.9 million in the second quarter of 2019. The Company reported adjusted pre-tax, pre-provision ("PTPP") earnings of $57.8 million this quarter, reflecting increases of 73.0% and 89.7% from $33.4 million and $30.5 million in the first quarter of 2020 and second quarter of 2019, respectively.

President and Chief Executive Officer, Christopher T. Holmes stated, "The second quarter of 2020 was a unique and challenging environment for our Company. During the second quarter, we assisted our customers by approving and funding over 2,900 Paycheck Protection Program ("PPP") loans totaling $314.7 million for small businesses, preserving jobs for over 36,000 employees in our communities and now we are focused on maintaining close relationships with these businesses as they proceed to the forgiveness phase. We anticipate recognizing an estimated $5.5 million in deferred origination fees, net of third party costs and deferred salaries, over the remaining life of the PPP loan portfolio. Additionally, we reached out to our customers and deferred loan payments for over 1,950 consumers and businesses totaling $918.3 million and we are now working with each customer individually to assist as appropriate on a go forward basis. Between our team's ability to operate in this unprecedented environment and the caring and compassion that they have shown for our customers and their fellow associates, I have never been more proud to be part of the FirstBank team. We have built on relationships and developed a trust with our customers and communities that will be a growth catalyst for years to come."

Holmes commented further, "In the face of these challenges, we positioned the Company for the road ahead by improving our liquidity position, increasing our credit reserve and building our capital through a very strong adjusted pre-tax, pre-provision ROAA of 3.29%. We also completed our conversion of Farmers National Bank of Scottsville (KY) ("Farmers National") and continued working towards the closing of our pending merger with Franklin Financial Network, Inc. ("Franklin" and the "Franklin merger")."

Performance Summary

 

 

2020

 

2019

 

Annualized

 

 

(dollars in thousands, expect per share data)

 

Second Quarter

 

First Quarter

 

Second Quarter

 

2Q20 / 1Q20
% Change

 

2Q20 / 2Q19
% Change

Balance Sheet Highlights

 

 

 

 

 

 

 

 

 

 

Investment securities

 

$

751,767

 

 

$

767,575

 

 

$

678,457

 

 

(8.28)

%

 

10.8

%

Loans - held for sale

 

435,479

 

 

325,304

 

 

294,699

 

 

136.2

%

 

47.8

%

Loans - held for investment (HFI)

 

4,827,023

 

 

4,568,038

 

 

4,289,516

 

 

22.8

%

 

12.5

%

Allowance for credit losses

 

113,129

 

 

89,141

 

 

30,138

 

 

108.2

%

 

275.4

%

Total assets

 

7,255,536

 

 

6,655,687

 

 

5,940,402

 

 

36.2

%

 

22.1

%

Customer deposits

 

5,937,373

 

 

5,356,569

 

 

4,812,962

 

 

43.6

%

 

23.4

%

Brokered and internet time deposits

 

15,428

 

 

20,363

 

 

29,864

 

 

(97.5)

%

 

(48.3)

%

Total deposits

 

5,952,801

 

 

5,376,932

 

 

4,842,826

 

 

43.1

%

 

22.9

%

Borrowings

 

328,662

 

 

327,822

 

 

257,299

 

 

1.03

%

 

27.7

%

Total shareholders' equity

 

805,216

 

 

782,330

 

 

718,759

 

 

11.8

%

 

12.0

%

Tangible book value per share*

 

$

19.07

 

 

$

18.35

 

 

$

17.18

 

 

 

 

 

Tangible common equity to tangible assets*

 

8.67

%

 

9.11

%

 

9.22

%

 

 

 

 

* Certain measures are considered non-GAAP financial measures. See "Use of non-GAAP Financial Measures" and the corresponding non-GAAP reconciliation tables in the Supplemental Financial Information, which accompanies this Earnings Release, as well as "Use of non-GAAP Financial Measures" and the Appendix in the Earnings Release Presentation dated July 21, 2020, for a reconciliation and discussion of this non-GAAP measure.

 

 

2020

 

2019

(dollars in thousands, except share data)

 

Second Quarter

 

First Quarter

 

Second Quarter

Results of operations

 

 

 

 

 

 

Net interest income

 

$

55,337

 

 

$

56,249

 

 

$

57,023

 

NIM

 

3.50

%

 

3.92

%

 

4.39

%

Provisions for credit losses

 

$

25,921

 

 

$

29,565

 

 

$

881

 

Net charge-off ratio

 

0.00

%

 

0.19

%

 

0.05

%

Noninterest income

 

$

81,491

 

 

$

42,700

 

 

$

32,979

 

Mortgage banking income

 

$

72,168

 

 

$

32,745

 

 

$

24,526

 

Total revenue

 

$

136,828

 

 

$

98,949

 

 

$

90,002

 

Noninterest expenses

 

$

80,579

 

 

$

68,559

 

 

$

64,119

 

Merger and mortgage restructuring expenses

 

$

1,586

 

 

$

3,050

 

 

$

4,612

 

Efficiency ratio

 

58.9

%

 

69.3

%

 

71.2

%

Core efficiency ratio*

 

57.5

%

 

65.7

%

 

65.9

%

Adjusted pre-tax, pre-provision earnings*

 

$

57,835

 

 

$

33,440

 

 

$

30,495

 

Total adjusted mortgage banking pre-tax contribution *

 

$

33,616

 

 

$

8,019

 

 

$

2,563

 

Net income

 

$

22,873

 

 

$

745

 

 

$

18,688

 

Diluted earnings per share

 

$

0.70

 

 

$

0.02

 

 

$

0.59

 

Effective tax rate

 

24.6

%

 

9.70

%

 

25.3

%

Weighted average number of shares outstanding - fully diluted

 

32,506,417

 

 

31,734,112

 

 

31,378,018

 

Actual shares outstanding - period end

 

32,101,108

 

 

32,067,356

 

 

30,865,636

 

Returns on average:

 

 

 

 

 

 

As reported

 

 

 

 

 

 

Assets ("ROAA")

 

1.30

%

 

0.05

%

 

1.30

%

Equity ("ROAE")

 

11.6

%

 

0.39

%

 

10.6

%

Tangible common equity ("ROATCE")*

 

15.3

%

 

0.52

%

 

14.4

%

Adjusted pre-tax, pre-provision

 

 

 

 

 

 

Assets*

 

3.29

%

 

2.10

%

 

2.12

%

Equity*

 

29.2

%

 

17.5

%

 

17.3

%

Tangible common equity*

 

38.6

%

 

23.2

%

 

23.5

%

* Certain measures are considered non-GAAP financial measures. See "Use of non-GAAP Financial Measures" and the corresponding non-GAAP reconciliation tables in the Supplemental Financial Information, which accompanies this Earnings Release, as well as "Use of non-GAAP Financial Measures" and the Appendix in the Earnings Release Presentation dated July 21, 2020, for a reconciliation and discussion of this non-GAAP measure.

Measured Growth and Enhanced Liquidity

The Company grew loans (HFI) to $4.83 billion, an increase of 12.5% year over year. Excluding PPP loans, adjusted loans (HFI) were $4.51 billion, an increase of 5.19% compared to the prior year period, and a decline of $55.7 million from the first quarter of 2020. Adjusted loan growth, excluding PPP loans, was lower this quarter as the Company took a measured approach to new credits and focused on servicing customers impacted by the pandemic crisis. Contractual yield on loans decreased from 5.14% in the first quarter to 4.57% in the second quarter. PPP loans caused an 18 basis point decline in contractual yields. The lower loan yields reflect the impact of rate cuts by the Federal Reserve late in the first quarter and an overall lower interest rate environment.

During the second quarter of 2020, the Company grew customer deposits by $580.8 million to $5.94 billion, reflecting annualized quarterly growth of 43.6% and year over year growth of 23.4%. The growth is partially attributable to proceeds customers received from PPP loans in addition to an increase of $38.9 million in mortgage servicing related deposits. The cost of interest-bearing deposits for the second quarter declined by 33 basis points from the first quarter to 0.92%, while cost of total deposits declined by 29 basis points to 0.65%. Loans (HFI) to deposits decreased to 81.1% during the second quarter of 2020 from 85.0% the previous quarter.

Additionally, during the quarter, on balance sheet liquidity increased to $988.5 million, or 14.0% of tangible assets, from $773.5 million, or 12.0% of tangible assets in the first quarter of 2020. During the second quarter of 2020, investment securities decreased $15.8 million to $751.8 million, or 10.4% of total assets, compared with the previous quarter. The decline was primarily due to prepayments of mortgage backed securities and maturity of municipal securities, while cash and cash equivalents increased $292.5 million to $717.6 million, compared with the first quarter of 2020.

The Company's net interest income for the quarter was $55.3 million, representing a decrease from $56.2 million last quarter and $57.0 million for the second quarter of 2019. The Company's net interest margin ("NIM") was 3.50% for the second quarter, compared to 3.92% and 4.39% for the first quarter of 2020 and the second quarter of 2019, respectively. Accretion related to purchased loans and nonaccrual interest contributed seven basis points to the NIM in the second quarter of 2020 compared to 13 and 17 basis points for the first quarter of 2020 and the second quarter of 2019, respectively. Overall, the NIM for the second quarter of 2020 was impacted by a 70 basis point decline in the yield on interest-earning assets partially offset by a 33 basis point decline in the rate on interest-bearing liabilities on a linked quarter basis. In addition to the lower interest rate environment, yield on average earning assets was impacted by the balance sheet mix, as average interest bearing deposits with other financial institutions increased to 7.91% of average earning assets in the second quarter of 2020 as compared to 4.93% for the previous quarter, while PPP loans with a contractual yield of 1.02% represented 3.64% of average earning assets in the second quarter of 2020.

Holmes commented, "Our team delivered tremendous growth in noninterest-bearing deposits for the quarter, solidifying our liquidity position as we face these uncertain times. Net interest margin in the quarter was impacted by our strategy to strengthen the balance sheet, which was accomplished by increasing liquidity and our thoughtful approach to loan growth. Our priorities remain the health and safety of our customers and associates, liquidity, capital, profitability and growth, in that order. As we continue forward, we would expect our margin to rebound as excess liquidity is deployed into loans, lower-yielding PPP loans are forgiven and come off of our balance sheet, and higher cost time deposits reprice downward."

Noninterest Income Benefits from Mortgage Production

Noninterest income was $81.5 million for the second quarter of 2020, compared to $42.7 million for the first quarter of 2020 and $33.0 million for the second quarter of 2019. Mortgage banking income was $72.2 million for the second quarter of 2020, compared to $32.7 million for the first quarter of 2020 and $24.5 million for the second quarter of 2019.

During the quarter, the Company produced strong results from the mortgage business driven by the lower interest rate environment and higher profit margins across the industry. Interest rate lock commitment volume totaled $2.24 billion in the second quarter of 2020 compared to $2.09 billion in the first quarter of 2020 and $1.82 billion in the second quarter of 2019.

During the second quarter of 2020, the Company's total adjusted mortgage banking pre-tax direct contribution was $33.6 million, compared to $8.0 million in the first quarter of 2020 and $2.6 million in the second quarter of 2019, excluding $0.8 million of mortgage restructuring expenses.

Holmes commented, "I am very proud of our mortgage team for their performance so far in 2020, especially their efforts in the second quarter as they delivered $33.6 million in direct contribution. The team has capitalized on the current interest rate environment through strong refinance volumes as well as new purchase originations. The operation has benefited from atypical margins, lack of capacity across the industry and a robust origination environment, partially offset by depressed servicing values and elevated prepayments of our serviced mortgages. During these times of changing interest rates and volatile markets, we continue monitoring the overall liquidity of the mortgage markets and activities by the federal housing agencies on our servicing portfolio."

Noninterest Expenses and Efficiency Gains

Noninterest expense was $80.6 million for the second quarter of 2020, compared to $68.6 million for the first quarter of 2020 and $64.1 million for the second quarter of 2019. On an adjusted basis, noninterest expense was $79.0 million for the second quarter of 2020, $65.5 million for the first quarter of 2020, and $59.5 million for the second quarter of 2019. The sequential quarter increase is primarily related to increased mortgage commissions and origination expenses, as core bank expenses remained relatively flat on a linked quarter basis due to the Company's expense control measures during the pandemic.

Holmes noted, "Modestly lower core bank noninterest expenses reflects our commitment to keeping costs contained as we navigate through these uncertain times. Expenses were elevated for the Company quarter over quarter due to our mortgage division, however the efficiency of the mortgage operation and lower core bank expenses reflect our disciplined approach as we continue balancing profitability, investment decisions and capital efficiency."

Asset Quality Remains Stable

During the second quarter of 2020, the Company recognized a provision for credit losses of $24.0 million, and a provision for unfunded commitments of $1.9 million, reflecting the impact of the varying economic forecasts related to the pandemic crisis. The Company continues to take a conservative approach regarding the economic recovery, resulting in a build of the allowance for credit losses (ACL) to $113.1 million, or 2.34% of loans held for investment and 2.51% adjusted to exclude PPP loans.

The Company's net charge-offs to average loans were 0.0% for the second quarter of 2020 compared to 0.19% in the first quarter of 2020 and 0.05% in the second quarter of 2019. The Company's nonperforming assets decreased to 0.71% of total assets as of June 30, 2020, compared to 0.74% at March 31, 2020. Nonperforming loans were 0.72% of loans held for investment at June 30, 2020, compared to 0.68% at March 31, 2020.

Holmes commented, "While our credit metrics continued to reflect strong credit quality during the second quarter, the impact of the pandemic crisis and the uncertainty of a second wave led to increased provisions and building our ACL, which is reflective of the economic forecasts at the end of the quarter. We have certainly seen an improvement in some pockets of the economy and across our bank footprint, however, it is still too early to discern the overall impact to our loan portfolio. We are approaching the end of the deferred payments for many of our customers and are taking a proactive approach to address their individual circumstances related to the crisis."

Capital Well Positioned

"Our adjusted pre-tax, pre-provision earnings increased by 73.0% sequentially and provided earnings to offset the increased provisions, while growing capital, as we continue to navigate the impacts from the pandemic. Our current level of tangible common equity at 8.7% of tangible assets and our simple capital structure of common equity and minimal trust preferred securities, positions us well and gives us multiple capital options, including the continuation of quarterly dividends in the near term. Our regulatory capital levels remained solid and improved during the quarter, withstanding the impact of CECL and the pandemic," commented Holmes.

Summary

Holmes further commented, "We understand the next couple quarters will present additional challenges as we manage our loan deferrals, the Franklin merger and the continued impact of the pandemic. Challenges notwithstanding, we are very proud of our performance during the second quarter in an adverse economic environment and with employees working from home across our footprint. The pandemic has tested our ability to serve our customers, our associates and our shareholders, and so far we like our results."

WEBCAST AND CONFERENCE CALL INFORMATION

FB Financial Corporation will host a conference call to discuss the Company's financial results at 8:00 a.m. CT on Tuesday, July 21, 2020, and the conference call will be broadcast live over the Internet at https://www.webcaster4.com/Webcast/Page/1631/35639 . An online replay will be available approximately an hour following the conclusion of the live broadcast.

ABOUT FB FINANCIAL CORPORATION

FB Financial Corporation (NYSE: FBK) is a bank holding company headquartered in Nashville, Tennessee. FB Financial Corporation operates through its wholly owned banking subsidiary, FirstBank, the third largest Tennessee-headquartered community bank, with 73 full-service bank branches across Tennessee, Kentucky, North Alabama and North Georgia, and mortgage offices across the Southeast. FirstBank serves five of the largest metropolitan markets in Tennessee and has approximately $7.3 billion in total assets.

SUPPLEMENTAL FINANCIAL INFORMATION AND EARNINGS PRESENTATION

Investors are encouraged to review this Earnings Release in conjunction with the Supplemental Financial Information and Earnings Presentation posted on the Companys website, which can be found at https://investors.firstbankonline.com . This Earnings Release, the Supplemental Financial Information and the Earnings Presentation are also included with a Current Report on Form 8-K that the Company furnished to the U.S. Securities and Exchange Commission ("SEC") on July 20, 2020.

BUSINESS SEGMENT RESULTS

The Company has included its business segment financial tables as part of this Earnings Release. A detailed discussion of our business segments is included in the Companys Annual Report on Form 10-K filed with the SEC for the year ended December 31, 2019, and investors are encouraged to review that discussion in conjunction with this Earnings Release.

FORWARD-LOOKING STATEMENTS

Certain statements contained in this press release may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements include, without limitation, statements regarding the projected impact of the COVID-19 global pandemic on our business operations, statements relating to the timing, benefits, costs, and synergies of the proposed merger with Franklin Financial Network, Inc. ("Franklin") (the "Franklin merger") and of the recent merger with FNB Financial Corp. ("FNB") (together with the Franklin merger, the "mergers"), and FB Financials future plans, results, strategies, and expectations. These statements can generally be identified by the use of the words and phrases "may," "will," "should," "could," "would," "goal," "plan," "potential," "estimate," "project," "believe," "intend," "anticipate," "expect," "target," "aim," "predict," "continue," "seek," "projection," and other variations of such words and phrases and similar expressions. These forward-looking statements are not historical facts, and are based upon current expectations, estimates, and projections, many of which, by their nature, are inherently uncertain and beyond FB Financials control. The inclusion of these forward-looking statements should not be regarded as a representation by FB Financial or any other person that such expectations, estimates, and projections will be achieved. Accordingly, FB Financial cautions shareholders and investors that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions, and uncertainties that are difficult to predict. Actual results may prove to be materially different from the results expressed or implied by the forward-looking statements. A number of factors could cause actual results to differ materially from those contemplated by the forward-looking statements including, without limitation, (1) current and future economic conditions, including the effects of declines in housing and commercial real estate prices, high unemployment rates, and a continued slowdown in economic growth in the local or regional economies in which we operate and/or the US economy generally, (2) the effects of the COVID-19 pandemic, including the magnitude and duration of the pandemic and its impact on general economic and financial market conditions and on our business and our customers' business, results of operations, asset quality and financial condition, (3) changes in government interest rate policies, (4) our ability to effectively manage problem credits, (5) the risk that the cost savings and any revenue synergies from the mergers or another acquisition may not be realized or may take longer than anticipated to be realized, (6) disruption from the mergers with customer, supplier, or employee relationships, (7) the occurrence of any event, change, or other circumstances that could give rise to the termination of the merger agreement with Franklin, (8) the failure to obtain necessary regulatory approvals for the Franklin merger, (9) the possibility that the costs, fees, expenses, and charges related to the Franklin merger may be greater than anticipated, including as a result of unexpected or unknown factors, events, or liabilities, (10) the failure of the conditions to the Franklin merger to be satisfied, (11) the risks related to the integrations of the combined businesses following the Franklin merger, including the risk that the integration will be materially delayed or will be more costly or difficult than expected, (12) the diversion of management time on issues related to the mergers, (13) the ability of FB Financial to effectively manage the larger and more complex operations of the combined company following the Franklin merger, (14) the risks associated with FB Financials pursuit of future acquisitions, (15) reputational risk and the reaction of the parties respective customers to the mergers, (16) FB Financials ability to successful execute its various business strategies, including its ability to execute on potential acquisition opportunities, (17) the risk of potential litigation or regulatory action related to the Franklin merger, and (18) general competitive, economic, political, and market conditions. Further information regarding FB Financial and factors which could affect the forward-looking statements contained herein can be found in FB Financial's Annual Report on Form 10-K for the fiscal year ended December 31, 2019, and its other filings with the Securities and Exchange Commission (the "SEC"). Many of these factors are beyond FB Financials ability to control or predict. If one or more events related to these or other risks or uncertainties materialize, or if the underlying assumptions prove to be incorrect, actual results may differ materially from the forward-looking statements. Accordingly, shareholders and investors should not place undue reliance on any such forward-looking statements. Any forward-looking statement speaks only as of the date of this press release, and FB Financial undertakes no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law. New risks and uncertainties may emerge from time to time, and it is not possible for FB Financial to predict their occurrence or how they will affect the Company.

FB Financial qualifies all forward-looking statements by these cautionary statements.

GAAP RECONCILIATION AND USE OF NON-GAAP FINANCIAL MEASURES

This Earnings Release contains certain financial measures that are not measures recognized under U.S. generally accepted accounting principles ("GAAP") and therefore are considered non-GAAP financial measures. These non-GAAP financial measures include, without limitation, adjusted net income, adjusted diluted earnings per share, adjusted and unadjusted pre-tax pre-provision earnings, adjusted pre-tax pre-provision diluted earnings per share, adjusted and unadjusted pre-tax pre-provision earnings per share, core revenue, core noninterest expense and core noninterest income, core efficiency ratio (tax equivalent basis), Banking segment core efficiency ratio (tax equivalent basis), Mortgage segment core efficiency ratio (tax equivalent basis), adjusted mortgage contribution, adjusted return on average tangible common equity, adjusted pre-tax pre-provision return on average tangible common equity, adjusted return on average assets and equity, adjusted pre-tax pre-provision return on average assets and equity, core total revenue, adjusted allowance for credit losses, adjusted loans held for investment, and adjusted allowance for credit losses as a percentage of loans held for investment, which excludes the impact of PPP loans. Each of these non-GAAP metrics excludes certain income and expense items that the Companys management considers to be non-core/adjusted in nature. The Company refers to these non-GAAP measures as adjusted measures. The corresponding Supplemental Financial Information and Earnings Release Presentation also presents tangible assets, tangible common equity, tangible book value per common share, tangible common equity to tangible assets, return on tangible common equity, return on average tangible common equity and adjusted return on average tangible common equity. Each of these non-GAAP metrics excludes the impact of goodwill and other intangibles.

The Companys management uses these non-GAAP financial measures in their analysis of the Companys performance, financial condition and the efficiency of its operations as management believes such measures facilitate period-to-period comparisons and provide meaningful indications of its operating performance as they eliminate both gains and charges that management views as non-recurring or not indicative of operating performance. Management believes that these non-GAAP financial measures provide a greater understanding of ongoing operations and enhance comparability of results with prior periods as well as demonstrate the effects of significant non-core gains and charges in the current and prior periods. The Companys management also believes that investors find these non-GAAP financial measures useful as they assist investors in understanding the Companys underlying operating performance and in the analysis of ongoing operating trends. In addition, because intangible assets such as goodwill and other intangibles, and the other items excluded each vary extensively from company to company, the Company believes that the presentation of this information allows investors to more easily compare the Companys results to the results of other companies. However, the non-GAAP financial measures discussed herein should not be considered in isolation or as a substitute for the most directly comparable or other financial measures calculated in accordance with GAAP. Moreover, the manner in which the Company calculates the non-GAAP financial measures discussed herein may differ from that of other companies reporting measures with similar names. Investors should understand how such other banking organizations calculate their financial measures similar or with names similar to the non-GAAP financial measures the Company has discussed herein when comparing such non-GAAP financial measures. See the "Use of non-GAAP Financial Measures" and the corresponding non-GAAP reconciliation tables in the Supplemental Financial Information as well as "Use of non-GAAP Financial Measures" and the Appendix in the Earnings Release Presentation dated July 21, 2020, for a discussion and reconciliation of these measures to the most directly comparable GAAP financial measures.

Financial Summary and Key Metrics

(Unaudited)

( In Thousands, Except Share Data and % )

 

 

2020

 

2019

 

 

Second Quarter

 

First Quarter

 

Second Quarter

Statement of Income Data

 

 

 

 

 

 

Total interest income

 

$

65,607

 

 

$

69,674

 

 

$

71,719

 

Total interest expense

 

10,270

 

 

13,425

 

 

14,696

 

Net interest income

 

55,337

 

 

56,249

 

 

57,023

 

Total noninterest income

 

81,491

 

 

42,700

 

 

32,979

 

Total noninterest expense

 

80,579

 

 

68,559

 

 

64,119

 

Earnings before income taxes and provisions for credit losses

 

56,249

 

 

30,390

 

 

25,883

 

Provisions for credit losses

 

25,921

 

 

29,565

 

 

881

 

Income tax expense

 

7,455

 

 

80

 

 

6,314

 

Net income

 

$

22,873

 

 

$

745

 

 

$

18,688

 

Net interest income (tax-equivalent basis)

 

$

55,977

 

 

$

56,784

 

 

$

57,488

 

Adjusted net income*

 

$

24,086

 

 

$

5,296

 

 

$

22,098

 

Adjusted pre-tax, pre-provision earnings*

 

$

57,835

 

 

$

33,440

 

 

$

30,495

 

Per Common Share

 

 

 

 

 

 

Diluted net income

 

$

0.70

 

 

$

0.02

 

 

$

0.59

 

Adjusted diluted net income*

 

0.74

 

 

0.17

 

 

0.70

 

Book value

 

25.08

 

 

24.40

 

 

23.29

 

Tangible book value*

 

19.07

 

 

18.35

 

 

17.18

 

Weighted average number of shares outstanding - fully diluted

 

32,506,417

 

 

31,734,112

 

 

31,378,018

 

Period-end number of shares

 

32,101,108

 

 

32,067,356

 

 

30,865,636

 

Selected Balance Sheet Data

 

 

 

 

 

 

Cash and cash equivalents

 

$

717,592

 

 

$

425,094

 

 

$

164,336

 

Loans held for investment (HFI)

 

4,827,023

 

 

4,568,038

 

 

4,289,516

 

Allowance for credit losses (a)

 

(113,129)

 

 

(89,141)

 

 

(30,138)

 

Loans held for sale

 

435,479

 

 

325,304

 

 

294,699

 

Investment securities, at fair value

 

751,767

 

 

767,575

 

 

678,457

 

Other real estate owned, net

 

15,091

 

 

17,072

 

 

15,521

 

Total assets

 

7,255,536

 

 

6,655,687

 

 

5,940,402

 

Customer deposits

 

5,937,373

 

 

5,356,569

 

 

4,812,962

 

Brokered and internet time deposits

 

15,428

 

 

20,363

 

 

29,864

 

Total deposits

 

5,952,801

 

 

5,376,932

 

 

4,842,826

 

Borrowings

 

328,662

 

 

327,822

 

 

257,299

 

Total shareholders' equity

 

805,216

 

 

782,330

 

 

718,759

 

Selected Ratios

 

 

 

 

 

 

Return on average:

 

 

 

 

 

 

Assets

 

1.30

%

 

0.05

%

 

1.30

%

Shareholders' equity

 

11.56

%

 

0.39

%

 

10.6

%

Tangible common equity*

 

15.27

%

 

0.52

%

 

14.4

%

Average shareholders' equity to average assets

 

11.2

%

 

12.0

%

 

12.3

%

Net interest margin (NIM) (tax-equivalent basis)

 

3.50

%

 

3.92

%

 

4.39

%

Efficiency ratio (GAAP)

 

58.9

%

 

69.3

%

 

71.2

%

Core efficiency ratio (tax-equivalent basis)*

 

57.5

%

 

65.7

%

 

65.9

%

Loans HFI to deposit ratio

 

81.1

%

 

85.0

%

 

88.6

%

Total loans to deposit ratio

 

88.4

%

 

91.0

%

 

94.7

%

Yield on interest-earning assets

 

4.14

%

 

4.84

%

 

5.52

%

Cost of interest-bearing liabilities

 

0.94

%

 

1.27

%

 

1.54

%

Cost of total deposits

 

0.65

%

 

0.94

%

 

1.14

%

Credit Quality Ratios

 

 

 

 

 

 

Allowance for credit losses as a percentage of loans HFI (a)

 

2.34

%

 

1.95

%

 

0.70

%

Adjusted allowance for credit losses as a percentage of loans HFI* (a)

 

2.51

%

 

1.95

%

 

0.70

%

Net charge-offs as a percentage of average loans HFI

 

0.00

%

 

0.19

%

 

0.05

%

Nonperforming loans HFI as a percentage of total loans HFI

 

0.72

%

 

0.68

%

 

0.43

%

Nonperforming assets as a percentage of total assets

 

0.71

%

 

0.74

%

 

0.59

%

Preliminary capital ratios (Consolidated)

 

 

 

 

 

 

Shareholders' equity to assets

 

11.1

%

 

11.8

%

 

12.1

%

Tangible common equity to tangible assets*

 

8.67

%

 

9.11

%

 

9.2

%

Tier 1 capital (to average assets)

 

9.7

%

 

10.3

%

 

10.0

%

Tier 1 capital (to risk-weighted assets)

 

11.9

%

 

11.6

%

 

11.0

%

Total capital (to risk-weighted assets)

 

13.2

%

 

12.5

%

 

11.6

%

Common equity Tier 1 (to risk-weighted assets) (CET1)

 

11.4

%

 

11.0

%

 

10.4

%

(a) Excludes reserve for credit losses on unfunded commitments of $6.5 million and $4.6 million recorded in accrued expenses and other liabilities for the three months ended June 30, 2020 and March 31, 2020, respectively.

*These measures are considered non-GAAP financial measures. See "GAAP Reconciliation and Use of non-GAAP Financial Measures" and the corresponding financial tables below for reconciliations of these non-GAAP measures. Investors are encouraged to refer to the discussion of non-GAAP measures included in the corresponding earnings release.

Non-GAAP Reconciliation

For the Periods Ended

(Unaudited)

( In Thousands, Except Share Data and % )

 

 

 

 

 

 

 

 

2020

 

2019

Adjusted earnings

 

Second Quarter

 

First Quarter

 

 

 

Second Quarter

Pre-tax net income

 

$

30,328

 

 

$

825

 

 

 

 

$

25,002

 

Plus merger and mortgage restructuring expenses

 

1,586

 

 

3,050

 

 

 

 

4,612

 

Plus initial provision for credit losses on acquired loans

 

 

 

2,885

 

 

 

 

 

Adjusted pre-tax earnings

 

$

31,914

 

 

$

6,760

 

 

 

 

$

29,614

 

Income tax expense, adjusted

 

7,828

 

 

1,464

 

 

 

 

7,516

 

Adjusted earnings

 

$

24,086

 

 

$

5,296

 

 

 

 

$

22,098

 

Weighted average common shares outstanding - fully diluted

 

32,506,417

 

 

31,734,112

 

 

 

 

31,378,018

 

Adjusted diluted earnings per share

 

 

 

 

 

 

 

 

Diluted earnings per common share

 

$

0.70

 

 

$

0.02

 

 

 

 

$

0.59

 

Plus merger and mortgage restructuring expenses

 

0.05

 

 

0.10

 

 

 

 

0.15

 

Plus initial provision for credit losses on acquired loans

 

 

 

0.09

 

 

 

 

 

Less tax effect

 

0.01

 

 

0.04

 

 

 

 

0.04

 

Adjusted diluted earnings per share

 

$

0.74

 

 

$

0.17

 

 

 

 

$

0.70

 

 

 

 

 

 

 

 

 

 

 

 

2020

 

2019

Adjusted pre-tax pre-provision earnings

 

Second Quarter

 

First Quarter

 

 

 

Second Quarter

Pre-tax net income

 

$

30,328

 

 

$

825

 

 

 

 

$

25,002

 

Plus provisions for credit losses

 

25,921

 

 

29,565

 

 

 

 

881

 

Pre-tax pre-...

provision earnings

56,249

30,390

25,883

Plus merger and mortgage restructuring expenses

1,586

3,050

4,612

Adjusted pre-tax pre-provision earnings

$

57,835

$

33,440

$

30,495

Weighted average common shares outstanding - fully diluted

32,506,417

31,734,112

31,378,018

Adjusted pre-tax pre-provision diluted earnings per share

Diluted earnings per common share

$

0.70

$

0.02

$

0.59

Plus income tax expense

0.23

0.20

Plus provisions for credit losses

0.80

0.93

0.03

Pre-tax pre-provision earnings per share

1.73

0.95

0.82

Plus merger and mortgage restructuring expenses

0.05

0.10

0.15

Adjusted pre-tax pre-provision earnings per share

$

1.78

$

1.05

$

0.97

2020

2019

Core efficiency ratio (tax-equivalent basis)

Second Quarter

First Quarter

Second Quarter

Total noninterest expense

$

80,579

$

68,559

$

64,119

Less merger and mortgage restructuring expenses

1,586

3,050

4,612

Core noninterest expense

$

78,993

$

65,509

$

59,507

Net interest income (tax-equivalent basis)

$

55,977

$

56,784

$

57,488

Total noninterest income

81,491

42,700

32,979

Less gain (loss) on sales or write-downs of other real estate owned and other assets

32

(277)

94

Less (loss) gain from securities, net

(28)

63

52

Core noninterest income

81,487

42,914

32,833

Core revenue

$

137,464

$

99,698

$

90,321

Efficiency ratio (GAAP)(a)

58.9

%

69.3

%

71.2

%

Core efficiency ratio (tax-equivalent basis)

57.5

%

65.7

%

65.9

%

(a) Efficiency ratio (GAAP) is calculated by dividing reported noninterest expense by reported total revenue.

Non-GAAP Reconciliation (continued)

For the Periods Ended

(Unaudited)

(In Thousands, Except Share Data and %)

2020

2019

Banking segment core efficiency ratio (tax equivalent)

Second Quarter

First Quarter

Second Quarter

Core consolidated noninterest expense

$

78,993

$

65,509

$

59,507

Less Mortgage segment core noninterest expense

26,997

17,567

17,835

Core Banking segment noninterest expense

$

51,996

$

47,942

41,672

Core revenue

$

137,464

$

99,698

90,321

Less Mortgage segment total revenue

55,215

22,110

19,119

Core Banking segment total revenue

$

82,249

$

77,588

$

71,202

Banking segment core efficiency ratio (tax-equivalent basis)

63.2

%

61.8

%

58.5

%

Mortgage segment core efficiency ratio (tax equivalent)

Mortgage segment noninterest expense

$

26,997

$

17,567

$

18,664

Less mortgage restructuring expense

829

Core Mortgage segment noninterest expense

$

26,997

$

17,567

$

17,835

Mortgage segment total revenue

$

55,215

$

22,110

$

19,119

Mortgage segment core efficiency ratio (tax-equivalent basis)

48.9

%

79.5

%

93.3

2020

2019

Adjusted mortgage contribution

Second Quarter

First Quarter

Second Quarter

Mortgage segment pre-tax net contribution

$

28,218

$

4,543

$

455

Retail footprint:

Mortgage banking income

16,940

10,651

5,451

Mortgage banking expenses

11,542

7,175

4,172

Retail footprint pre-tax net contribution

5,398

3,476

1,279

Total adjusted mortgage banking pre-tax net contribution

$

33,616

$

8,019

$

1,734

Plus mortgage restructuring expense

829

Total adjusted mortgage banking pre-tax net contribution

$

33,616

$

8,019

$

2,563

Pre-tax pre-provision earnings

$

56,249

$

30,390

$

25,883

% total mortgage banking pre-tax pre-provision net contribution

59.8

%

26.4

%

6.70

%

Adjusted pre-tax pre-provision earnings

$

57,835

$

33,440

$

30,495

% total adjusted mortgage banking pre-tax pre-provision net contribution

58.1

%

24.0

%

8.40

%

2020

2019

Tangible assets and equity

Second Quarter

First Quarter

Second Quarter

Tangible assets

Total assets

$

7,255,536

$

6,655,687

$

5,940,402

Less goodwill

175,441

174,859

168,486

Less intangibles, net

17,671

18,876

19,945

Tangible assets

$

7,062,424

$

6,461,952

$

5,751,971

Tangible common equity

Total shareholders' equity

$

805,216

$

782,330

$

718,759

Less goodwill

175,441

174,859

168,486

Less intangibles, net

17,671

18,876

19,945

Tangible common equity

$

612,104

$

588,595

$

530,328

Common shares outstanding

32,101,108

32,067,356

30,865,636

Book value per common share

$

25.08

$

24.40

$

23.29

Tangible book value per common share

$

19.07

$

18.35

$

17.18

Total shareholders' equity to total assets

11.1

%

11.8

%

12.1

%

Tangible common equity to tangible assets

8.67

%

9.11

%

9.22

%

Non-GAAP Reconciliation (continued)

For the Periods Ended

(Unaudited)

(In Thousands, Except Share Data and %)

2020

2019

Return on average tangible common equity

Second Quarter

First Quarter

Second Quarter

Total average shareholders' equity

$

795,705

$

768,929

$

708,557

Less average goodwill

175,150

171,532

167,781

Less average intangibles, net

18,209

18,152

20,214

Average tangible common equity

$

602,346

$

579,245

$

520,562

Net income

$

22,873

$

745

$

18,688

Return on average tangible common equity

15.3

%

0.52

%

14.4

%

2020

2019

Adjusted return on average tangible common equity

Second Quarter

First Quarter

Second Quarter

Average tangible common equity

$

602,346

$

579,245

$

520,562

Adjusted net income

24,086

5,296

22,098

Adjusted return on average tangible common equity

16.1

%

3.68

%

17.0

%

2020

2019

Adjusted pre-tax pre-provision return on average tangible common equity

Second Quarter

First Quarter

Second Quarter

Average tangible common equity

$

602,346

$

579,245

$

520,562

Adjusted pre-tax pre-provision earnings

57,835

33,440

30,495

Adjusted pre-tax pre-provision return on average tangible common equity

38.6

%

23.2

%

23.5

%

2020

2019

Adjusted return on average assets and equity

Second Quarter

First Quarter

Second Quarter

Net income

$

22,873

$

745

$

18,688

Average assets

7,074,612

6,409,417

5,771,371

Average equity

795,705

768,929

708,557

Return on average assets

1.30

%

0.05

%

1.30

%

Return on average equity

11.6

%

0.39

%

10.6

%

Adjusted net income

$

24,086

$

5,296

$

22,098

Adjusted return on average assets

1.37

%

0.33

%

1.54

%

Adjusted return on average equity

12.2

%

2.77

%

12.5

%

2020

2019

Adjusted pre-tax pre-provision return on average assets and equity

Second Quarter

First Quarter

Second Quarter

Net income

$

22,873

$

745

$

18,688

Average assets

7,074,612

6,409,417

5,771,371

Average equity

795,705

768,929

708,557

Return on average assets

1.30

%

0.05

%

1.30

%

Return on average equity

11.6

%

0.39

%

10.6

%

Adjusted pre-tax pre-provision earnings

$

57,835

$

33,440

$

30,495

Adjusted pre-tax pre-provision return on average assets

3.29

%

2.10

%

2.12

%

Adjusted pre-tax pre-provision return on average equity

29.2

%

17.5

%

17.3

%

Non-GAAP Reconciliation (continued)

For the Periods Ended

(Unaudited)

(In Thousands, Except Share Data and %)

2020

2019

Adjusted allowance for credit losses to loans held for investment

Second Quarter

First Quarter

Second Quarter

Allowance for credit losses

$

113,129

$

89,141

$

30,138

Less allowance for credit losses attributed to PPP loans

51

Adjusted allowance for credit losses

$

113,078

$

89,141

$

30,138

Loans held for investment

$

4,827,023

$

4,568,038

$

4,289,516

Less PPP loans

314,678

Adjusted loans held for investment

$

4,512,345

$

4,568,038

$

4,289,516

Allowance for credit losses to loans held for investment

2.34

%

1.95

%

0.70

%

Adjusted allowance for credit losses to loans held for investment

2.51

%

1.95

%

0.70

%

(FBK - ER)

View source version on businesswire.com: https://www.businesswire.com/news/home/20200720005708/en/

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